On November 20, 2015, the CFPB published its current rulemaking agenda. Under the Dodd-Frank Wall Street Reform Act, the CFPB drafts and implements new regulations governing certain consumer finance products and services. The CFPB publishes its regulatory agenda twice a year, which summarizes the proposed regulations (or “rules”) the Bureau is considering. Currently, the CFPB is considering rules that will regulate contractual arbitration and class action waiver clauses, payday and automobile title lending, overdraft practices, debt collection, business lending, mortgage servicing, credit reporting, and student loan servicing.
Contractual Arbitration Clauses. Many companies and other financial institutions contractually require consumers to resolve disputes through arbitration. These mandatory arbitration clauses also typically include class actions waivers, in which consumers waive all rights to participate in class action lawsuits regarding the financial product. The CFPB is proposing a rule that may prohibit class action waivers in some consumer finance contracts and require companies to provide arbitration award amounts to the CFPB, so the CFPB can monitor the fairness of such proceedings. The proposed regulation will affect credit cards, depository accounts, payday loans, and others consumer finance products. The CFPB has published an outline summarizing its proposals, which it recently released to the public. The CFPB will consider feedback from industry participants before initiating formal notice and comment rulemaking. The CFPB did not provide a timeline for the notice and comment process in the November 20 announcement.
Payday and Auto Title Lending. The CFPB announced that it is developing a formal notice of proposed rulemaking regarding payday and automobile title loans. The proposed regulation will likely address the CFPB’s concerns that these lenders do not properly assess borrowers’ creditworthiness when originating these loans. The proposed regulation may also focus on these lenders’ payment collection practices, especially any practices related to how late fees are assessed. The CFPB expects to release the proposed rule for notice and comment in the first quarter of 2016. The CFPB’s proposals for regulating payday and automobile lending are discussed in more detail here.
Overdraft Programs for Checking Accounts. The CFPB is also considering a regulation addressing overdraft programs for checking accounts. The CFPB noted its concerns with how consumers consent to overdraft coverage, the order in which transactions are posted for overdraft purposes, limits on overdraft coverage, fee structures, and account closures related to overdrafts. The CFPB stated that it is continuing to research the issue at this time, and it did not provide a timeline for when it will initiate formal rulemaking procedures.
Debt Collection. The CFPB announced that it is conducting research regarding debt collection practices, in preparation for possible additional regulation of the industry. The CFPB noted that debt collection represents the largest source of complaints about the consumer finance industry. The CFPB did not provide a proposed timeline for any rulemaking, or specifically explain how it is considering regulating the industry.
Defining Larger Participants in Consumer Installment Loan and Automobile Title Loan Industries. The CFPB has authority under the Dodd-Frank Act to regulate certain non-bank financial institutions that are considered “larger participants” in the market for a consumer finance product. The CFPB is developing rules defining larger participants in both the consumer installment loan and automobile title loan industries. The CFPB also may propose regulations requiring lenders in these markets to register with the CFPB. The CFPB did not provide a timeline for formal rulemaking for these regulations.
Women-Owned and Minority-Owned Businesses and Small Businesses. The CFPB is also considering a regulation requiring lenders to collect information regarding business loan applicants’ gender and race and whether the loan is for a small business. The CFPB will then require lenders to provide data to the CFPB regarding the number of loans made to women and minority racial populations and the number of small business loans originated. The CFPB is in the early stages of information gathering and research regarding this rule, though the CFPB noted the rule may be similar to the regulation requiring mortgage lenders to provide gender and race data to the CFPB.
Mortgage Servicing. The CFPB plans to finalize a proposed rule amending the mortgage servicing rules issued in 2014. The amendments, which are summarized in this proposal, will address servicers’ loss mitigation practices and practices related to borrower bankruptcy or mortgagors’ successors in interest. The CFPB did not provide a timeline for when it expects to finalize these amendments.
Finally, the CFPB noted that it is monitoring enforcement trends and consumer complaints in the student loan servicing and credit reporting industries, and it is considering proposing regulations for these industries.
Enforcement Watch will continue to monitor the CFPB’s rulemaking announcements.